Google underwrites Firefox another year, even as Chrome outpaces it

Mozilla's 2012 finances show it propped up by search yet again

Analysis The good news for the Mozilla Foundation is that its revenues for calendar year 2012 were nearly double what they were the previous year. The bad news is that the lion's share of those funds once again came from internet advertising mega-giant Google.

The nonprofit published its latest annual report and audited financial statement [PDF] on Thursday, which showed it pulled in $311m in revenue for the year – a figure 90.2 per cent higher than its income for 2011.

But Mozilla doesn't realize revenues from its software development activities directly. The Firefox browser and Mozilla's other products are all available to download free of charge.

Instead, the foundation relies on "royalties," which it says includes proceeds from sales of various merchandise on its websites, but mainly involves payments from internet companies for clicks coming from users of Firefox's built-in search box. In 2012, 97.9 per cent of Mozilla's revenues came from these royalties.

Mozilla says it has search partnerships in place not just with Google but with multiple companies, including Amazon, Bing/Microsoft, eBay, Yahoo!, and Yandex, among others. But everyone knows that one single company provides most of Mozilla's royalty revenue, and it was that relationship that led to the steep jump in the nonprofit's total revenue from 2011 to 2012.

"Our search partnerships are designed as multi-year contracts," the browser maker explained in its finance FAQ. "Near the end of each contract, Mozilla negotiates market-value rates from multiple search providers based on the present and future value our products provide. At the end of 2011, Mozilla negotiated a new agreement with Google based on growth and impact from our Firefox desktop browser."

In other words, Google's rate for search traffic went up and Mozilla's revenues went through the roof.

Why is that bad? Well, in one sense it isn't. Mozilla has to make some money somehow, and offering its browser as a search portal for internet companies is a fairly unobtrusive way to do it.

On the other hand, Google, while friendly to Mozilla, is also a competitor. Its own Chrome browser has already outpaced Firefox to become the most popular desktop browser on the web. Every time someone switches to Chrome, that's one more user who won't be adding to Mozilla's search-royalty bottom line. And while Google might be willing to send money Mozilla's way, it has no incentive to encourage anyone to use Firefox.

Also consider that consumers' browsing habits are increasingly shifting away from desktop PCs to mobile devices. According to stats from NetMarketShare, between mobile Chrome and the original Android Browser, Google owns around 30 per cent of the mobile browser market. Firefox for Android accounts for just one tenth of one per cent.

Not that Mozilla lacks ambition in the mobile space. Its current financial report only covers through December 2012. Since then, Mozilla has launched Firefox OS, its open-source mobile platform that is now being offered by Telefónica and Deutsche Telekom in 10 markets worldwide, with more to come.

Unfortunately, however, that effort will remain a cost center for Mozilla for the foreseeable future. "Mozilla's focus is on delivering a superior user experience and getting developers excited," the nonprofit's finance FAQ explains, "and not on generating revenue from Firefox OS at this time."

That's worrying, because the current mobile OS to beat – particularly in the developing markets that Mozilla has its eyes on – is Google's Android, which by some estimates is now running on something like 81 to 90 per cent of all smartphones worldwide.

There goes Mozilla again, trying to compete with Google, the company that provides it with most of its revenues.

But it has ever been thus at the lizardy browser maker, and fortunately, Google so far shows no signs of withdrawing its support for Mozilla. What's more, as a nonprofit, Mozilla is about as lean an organization as it comes. In 2012, it spent $157m, or roughly 50 per cent of its income, on software development and program services, even while ramping up its Firefox OS efforts.

Still, just once it would be nice to see the Mozilla Foundation find a significant source of revenue other than what it receives from Google, which – as the advertising titan's influence over the web and mobile markets continues to grow, year over year – increasingly starts to look like a sympathy donation. ®